Notes from the RingCentral S-1 IPO Filing

RingCentral, a provider of cloud-based phone systems and communications tools, just filed their S-1 to go public. This is interesting from a Software-as-a-Service (SaaS) perspective because RingCentral has a heavy telecom component to the business due to phone numbers, long distance minutes, etc in conjunction with the software component. I’m curious to see what the market values the business on the telecom to SaaS valuation continuum.

Here are notes from the RingCentral S-1 IPO filing:

  • Over 300,000 business customers (pg. 2)
  • Revenues (pg. 2):
    2010 – $50.2 million
    2011 – $78.9 million
    2012 – $114.5 million
    2013 1H – $73.2 million
  • Key benefits (pg. 3):
    Location independence
    Device independence
    Instant activation; easy account management
    Lower cost of ownership
    Seamless integration with other cloud-based applications
  • An original dot com business incorporated in February 1999 in California (pg. 5)
  • Losses (pg. 8):
    2010 – $7.3 million
    2011 – $13.9 million
    2012 – $35.4 million
    2013 1H – $23.9 million
  • Accumulated deficit of $107.5 million (pg. 10)
  • Level 3 Communications and provide the IP and phone networks (pg. 12)
  • Some support in the Philippines and some research and development in China (pg. 38)
  • Up to 10% of revenue comes from selling pre-configured phones (pg. 56)
  • Measures “Annualized Exit Monthly Recurring Subscriptions” as a key business metric defined as the monthly recurring revenue times 12 at the end of a given month (pg. 58)
  • Believes gross margins will grow as the business grows due to more pricing leverage with telecom costs (pg. 60)
  • Legal settlement costs of $1.1 million (pg. 67)
  • Overall gross margin is 58% (pg. 69)
  • Several patent lawsuits (pg. 88)
  • 399 full-time employees including 89 in China (pg. 105)
  • 1,050 contractors (pg. 105)
  • Co-founder / CEO owns 19.6% of the business (pg. 132)
  • Sequoia Capital owns 17.2% and Khosla Ventures owns 16.7% (pg. 132)

Public markets love growth and this is a strong growth story. RingCentral won’t receive the same multiple as a SaaS business due to lower gross margins but it’ll trade at a healthy premium regardless.

What else? What are your thoughts on the RingCentral S-1 IPO filing?

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